Abstract: How to restrain the self-interests of the managers so as to improve the transparency of accounting information and then improve the quality of analysts’ earnings forecast is an important topic in the capital market. This paper first investigates how D&O insurance affects the quality of analysts’ earnings forecasts, and then explores the moderating effect of executive power on the relationship between the two parties. The result shows that, compared with the companies that purchase no D&O insurances, the forecast errors and forecast divergence are less in the forecast made by the analysts on the companies that purchase D&O insurances. In addition, the excessive executive power will weaken the positive correlation between D&O insurances and the quality of analysts’ earnings forecasts. However, this weakened relationship can only affect the forecast divergence significantly, but no significant impact on the forecast error.

Key words: directors and officers insurance; quality of analysts’ earnings forecasts; information transparency; executives power